Every acquisition team knows this meeting.
The referral programme is live. It’s doing exactly what it was supposed to do. The early numbers are encouraging and everyone agrees there’s more to come. So naturally, somebody asks the obvious question.
“Can we tell our existing customers about it?”
That’s usually the point where the meeting stops being about marketing and starts becoming about organisational charts.
Suddenly you’re no longer talking to marketers. You’re talking to owners. The customer base belongs to Customer Value Management. Or CRM. Or Base Management. Or Customer Experience. Every company seems to have invented its own title for the department responsible for existing customers, but they all tend to have remarkably similar answers:
- “We already have a communications calendar.”
- “We’re trying to reduce email volumes.”
- “We have to protect the customer experience.”
- “We’ll look at it next quarter.”
I’ve sat through more versions of that conversation than I care to remember. For years I came away thinking acquisition teams simply needed to become better at selling referral internally.
I don’t think that’s the problem anymore. I think we’ve all been walking into the room with the wrong story.
The instinct is always to sell referral as an acquisition channel. That makes perfect sense. It acquires customers. That’s what it does. The trouble is you’re trying to persuade people who aren’t measured on acquisition. They’re measured on customer value, customer engagement, customer lifetime value and, ultimately, customer retention. Telling them your programme will generate more customers is a bit like trying to sell a fishing rod to someone who’s just told you they’re opening a bakery. It may well be an excellent fishing rod, but you’ve wandered into the wrong shop.
The interesting thing is that the data has been quietly pointing us towards a different conversation all along.
Over the last ten years we’ve analysed the behaviour of millions of customers across referral programmes for some of the world’s largest telecoms, banking, insurance and energy brands. Spend enough time looking at that amount of data and certain patterns become impossible to ignore. Some simply confirm what you already believed. Others make you stop, go back and check the numbers again because they don’t feel like they should be true.
The biggest surprise wasn’t about acquisition. It was about what happened after somebody referred.
Across programme after programme we saw the same pattern emerge. Customers who successfully referred a friend became dramatically less likely to leave over the following twelve months. In many programmes, annualised propensity to churn fell to almost zero. We looked for alternative explanations. We assumed there must be one. Yet the pattern kept reappearing.
Then we noticed something else.
Those same customers didn’t simply stay longer. They became more valuable. Over the following year they were around a third more likely to move onto higher-value tariffs, adopt additional products or deepen their relationship with the brand than comparable customers who hadn’t referred at all.
None of that should really have surprised us.
Think about the last time you recommended a restaurant. Or a holiday. Or a solicitor. Or even your broadband provider. You weren’t simply making a recommendation. You were lending somebody your judgement. You were putting a little of your own reputation behind that business.
Most of us don’t do that with companies we’re already planning to leave. That’s why I’ve started wondering whether referral has been wearing the wrong label for years.
Of course it’s an acquisition channel. For many of our clients it consistently contributes somewhere between 10% and 25% of all new customer acquisition, often at around half the acquisition cost of traditional paid channels.
But that’s only part of the story.
Referral is also one of the clearest behavioural signals of customer commitment you’ll ever find. It creates advocates. It strengthens loyalty. It increases engagement. It encourages customers to explore more of what you offer. In other words, it quietly achieves many of the things customer value teams are trying to achieve every single day.
Which makes those conversations about whether the acquisition team should be allowed to email the customer base feel slightly odd. Because perhaps the acquisition team isn’t asking for access to create more customers. Perhaps they’re asking for access to help keep the ones you already have. It’s exactly the same referral programme. It’s just a completely different conversation.
Gideon
P.S.Yes, I know. Email isn’t the answer to everything.
For some brands it’ll be push notifications. For others it’ll be SMS, your app, billing communications, customer portals, engineers, stores or call centres. The point isn’t the channel. It’s making sure your existing customers actually know the programme exists.
Ironically though, referral emails are still some of the best-performing emails most brands ever send. It’s not unusual to see open rates approaching 80% and click-through rates of 60% or more, largely because customers are motivated by the opportunity to help a friend and receive something in return.
So whether your brand’s preferred channel is email or something else entirely, don’t let the conversation become about the medium.
The conversation should be about the customer.